CORNELL UNIVERSITY MEDIA RELATIONS OFFICE
Nov. 27, 2019
By cutting workforce, Audi bets on new trends, upscale customers
Newswise — This week, Audi announced it would cut up to 9,500 jobs, roughly one in ten of its total staff, to focus more efforts and funding toward electric vehicle production. The company has also announced that it will add 2,000 positions in the areas of electric mobility and digitalization.
Thomas Jungbauer, professor of economics in the SC Johnson College of Business at Cornell University, studies tech firms and high-skilled labor markets. He says that by changing its work force, Audi is attempting to create a competitive advantage within a highly disrupted industry.
“Audi is well known for its craftsmanship and the power of its engines. The company has been a frontrunner in the world of motor sports and when it comes to new trends, be it about style or technology. Audi has to focus on the next generation’s upscale car customer as opposed to the masses. These customers are likely to demand an electric car that combines an elegant interior with the engine power and overall product quality the company is known for.
“This is where employees enter the equation. Being a benefit leader focusing on an upscale niche market segment, especially in times of increased automation, does not require many, but the right employees. In a fundamentally changing car industry that quite likely may lead to fewer car sales for Audi in general and may see the company struggle to keep up with their rivals BMW and Mercedes, it is of utmost importance for Audi to gain market share in this segment by developing the car for tomorrow’s upscale customer. Audi needs engineers that are trained in automation and electrically powered engines and a lean company to be able to offer exceptional cars at competitive prices.
“Firing up to 10,000 employees, however, clearly leaves a bad taste, especially in Audi’s home country, Germany, a market that is enormously important for the company, not only in terms of direct sales but also as an indicator or accelerator for other markets. There is no question that this move represents a gamble for Audi as a company. Nevertheless, it appears to be a bet that the company has to take.”
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